Report: SKorea Lining up Banks for $22B Arms Sale to Poland

Facts

• After hitting its statutory limits on import-export lending, South Korea is working to line up local banks to help Poland buy $22B worth of weapons as reported by Reuters .¹
• According to an anonymous South Korean government official, 'five local banks are reviewing a syndicated loan as a support measure' to help Poland buy South Korean rocket artillery systems and fighter jets.¹
• The move aims to help remove any possible financial obstacles for Poland to purchase the weapons, allowing South Korea to close what will be its most sizable arms deal ever.²
• The official did not provide more details about the size of the potential loan. Another anonymous official said that if Poland could not get enough loans for the proposed sale, 'there could be other financing measures on the way.'²
• The proposed deal is a follow-up to the comprehensive arms agreement signed between South Korea and Poland last year. Under that $13.7B deal, which is Seoul's largest to date, South Korean companies will provide tanks, howitzers, and fighter jets to Poland.³
• The 2022 arms agreement with Poland helped to establish South Korea as a major player in global weapons exports, which is a field largely dominated by the US and Russia. The war in Ukraine helped to pave the way for Seoul's weapons exports, with the country's defense exports totaling nearly $17B in 2022, up from $7.25B the previous year.⁴

Sources: ¹Reuters, ²BOL News, ³MarketScreener and ⁴BusinessLive.

Narratives

• Establishment-critical narrative, as provided by Nikkei Asia. South Korea is trying to profit off of war and global conflict. Despite the fact that South Korean law prohibits defense companies from selling their weapons directly to countries engaged in conflict, officials have their eye not only on the war in Ukraine but also on the developing war in Gaza. Seoul's loopholes of providing weapons to countries geographically close to Ukraine, like Poland, or refilling depleted US weapons stockpiles, allowing more American weapons to be sent directly to Ukraine and Israel, are insincere workarounds.
• Pro-establishment narrative, as provided by Reuters. Many countries around the world, like the US, are overextended with their foreign defense obligations. Countries are depleting their weapons stockpiles by arming Ukraine in its war against Russia, and this scarcity of weapons is not something they can easily or quickly solve on their own. South Korean defense companies can help fill this void. There is a need in this market that South Korea is more than equipped to fill.